November 28, 2018

Exploring The Chinese Coffee Industry, From Roasters to Consumers


“Made in China.” It’s not a hard phrase to come across. But “Roasted in China”? That’s a different story.

China’s coffee market has been drawing global attention. Starbucks’ recent plan to open 3,000 new shops over the next five years is just one of many developments highlighting China as a rising coffee-consuming country. Yet even so, not much is known internationally about the country’s coffee roasting and consumption industry.

So, I spoke to Peter Radosevich, International Sales Team Leader at Royal Coffee, about selling and roasting coffee in China – and what impact that could have globally.

You might also like Smoking Hot: Why Is The Korean Home Roasting Scene Taking Off?

view of the great wall of china

The Great Wall of China. Credit: Hanson Lu

Coffee Consumption in China

Let’s first understand the country’s coffee consumers.

The US Department of Agriculture’s 2018 report on the coffee market shows that the Chinese domestic consumption of coffee has almost doubled over the past four years. While the number hovers at around just 10% and 15% of the current consumption in the European Union and the US respectively, the potential for the Chinese market is huge.

In fact, many multinational companies have recently made large investments. Peter tells me that Luckin Coffee raised over 1 Billion RMB (roughly US $144 million/€126 million) early this year in order to compete with Starbucks in the retail coffee space. A significant amount of that funding is coming from Singapore. Canada’s Tim Hortons also plans to open more than 1,500 stores, while British chain Costa Coffee plans to roughly triple its number of Chinese stores by 2022.

Peter tells me that Chinese coffee consumption has been rapidly evolving, with a growing awareness of quality. However, the local coffee culture is still different from what you’ll find in countries such as the US. For instance, people rarely grind and brew coffee at home.

According to Peter, “instant coffee still makes up the vast majority of consumption” – something that is common in many traditional tea cultures, including the UK.

Milk-based beverages are popular on the Chinese market

Espresso-based drinks in a coffee shop. Credit: Blake Wisz

A Taste For Sweeter Roasts

But as the Chinese thirst for coffee grows, what kinds of drinks are people opting for?

Peter explains that there is a generational difference. Older consumers tend to prefer low-acid coffees with bigger bodies, such as a Sumatra Mandheling. Younger consumers with exposure to third wave roasters, on the other hand, may enjoy lighter roasts with their generally more acidic profile.

He also mentions that Chinese consumers often prefer sweet and clean coffees, for now. “Current preferences will certainly shift as domestic specialty coffee shops or commercial chains open and consumers’ knowledge continues to grow.”

Moreover, he tells me that Taiwanese, Korean, and Japanese specialty coffee cultures also influence the Chinese coffee industry.  “Top USA brands like Blue Bottle, Intelligencia, etc. still carry weight and cachet,” he says. “However, more of the companies and professionals from places like Taiwan and Korea come to do trainings and open businesses.”

As a result of this, for example, “many specialty roasters still pick out most or all post-roast defects by hand to ensure cleaner cups (unheard of when contrasted with many USA roasters).”

The specialty Chinese market is growing in popularity

Weighing roasted coffee beans on a scale. Credit: Maria Fernanda Gonzalez

Who Roasts The Coffee?

While China’s coffee market is growing, most of what people are brewing and drinking is actually roasted abroad.

According to the USDA report, China is forecast to import 48 million kilograms of roasted and ground coffee in 2018/19. This is a huge increase from around just 5.6 million kilograms in 2013/14.

However, China is also forecast to import 120 million kilograms of soluble coffee in 2018/19. This is another significant increase from 41 million kilograms in 2013/14.

And China’s green bean imports are negligible, not even listed in the report. In contrast, in the same report, the United States is forecast to import 1.6 billion kilograms of green bean coffee, and only about 12 million kilograms of roasted and ground coffee, in 2018/19.

In other words, in the US, only 2% of the coffee that comes into the country does so as roasted, ground, or soluble coffee, while almost 66% of the total Chinese coffee demand is met by imported roasted, ground, or soluble coffee.

Peter’s experiences support this data. “While there are stories every day about the rise of specialty coffee in China, the reality is that the majority of consumption is still instant and lower-grade coffee. Much of China’s imported coffee is lower-grade Vietnam Robusta.”

coffee falling on cooling pan after being roasted

Coffee pours into the cooling pan after being roasted.

What About Chinese Roasters?

There are few roasters in China compared to in Western coffee-consuming countries. However, their number is growing.

Peter divides China’s roasteries into two types: large commercial-scale roasters and single-shop roasters. The large commercial-scale roasters are those that focus on providing roasted beans for instant coffee or big wholesale businesses. Single-shop roasters, on the other hand, are those that often aim for higher quality and roast on a small scale, normally for their own shops but occasionally also for a limited number of wholesale consumers. These roasteries will typically use a 500 g or 1 kg roaster.

The home roasting market is also showing a gradual growth in mainland China. Peter believes that it could have large potential, given similar trends in Taiwan.

An expansive online retail marketplace is also a unique feature of the Chinese roasting industry. Peter tells me that there are many roasting companies with little to no retail presence who focus solely on building their online following.

freshly roasted coffee in cooling pan

Snow Mountain Creamery in Xining, China, roasts, grinds, and brews their own coffee. Credit: Gregory Hayes

Challenges For Chinese Roasters

No matter where you are, operating a roastery is difficult. Understanding the changing needs of consumers, maintaining consistent quality, balancing supply with demand… There are many aspects to master. But Peter tells me that roasters in China face an additional set of challenges.

First, they need to obtain permits for roasting. “Difficulty in obtaining permits for roasting is currently one of the biggest issues for the Chinese roasting industry,” he says.

“In an attempt to maintain stricter environmental standards, the government has cracked down on the number of businesses allowed to produce emissions. [It] has become the most strict in the biggest Tier 1 cities [Beijing, Shanghai, Guangzhou, Shenzhen, and Tianjin], which are also home to the country’s biggest coffee consumers.

“With permits becoming more difficult to secure, many roasters have had to move their operations to more remote industrial areas outside of major population centers. In other cases, roasters will pay to use the facility of an already permitted roaster to order to avoid the arduous process of trying to secure a permit on their own. These difficulties have also caused some small roasters to operate under the radar without properly permitted operations.”

Secondly, Chinese roasters often face exorbitant equipment prices. Peter says that the exclusive distributorship arrangements that many major roasters and international equipment manufacturers have in China allow domestic companies to monopolize the market and hike up prices.

On top of this, he tells me that roasting education is not as easily accessible as in some countries. However, the coffee training market has a significant presence in China. “From looking at the CQI website that certifies Q graders, there are more certified Q Graders in Greater China than Indonesia, Brazil, Guatemala, Ethiopia, Vietnam, Honduras, Peru, Mexico, and Costa Rica combined,” he stresses.

“Does that mean China has more coffee expertise than all of those producing countries combined? Perhaps not, but it does indicate a level of interest in specialty coffee and likely bodes well for the industry.”

bag of yunnan coffee

A bag of Yunnan coffee designed for tourists.

Where Does Chinese-Grown Coffee Go?

China isn’t just a country of consumers; it also produces coffee. So, who drinks this coffee?

China has produced approximately 120 million kilos of green bean coffee each year from 2014 to 2018. Yunnan, where much of China’s coffee is grown, produces mainly Arabica coffee which is then exported to Europe. As Peter says, “specialty roasters on the mainland [China] use mostly imported coffees.”

Nevertheless, China’s growing roaster population can turn to its home-grown coffee for some advantages.

Peter tells me, “Much of the coffee imported into China has an 8% duty, not to mention the cost of transportation and other related import charges. If the quality and price of production from Yunnan get to be on par with producing countries… it could become a more widely used coffee among domestic roasters. Many already use a portion of Yunnan [coffee] to help keep costs down in certain espresso blends.

“However, specialty coffee in Yunnan still has a long way to go. There are still processing issues, and many of the highest-altitude areas most suitable for growing high-quality coffee also are coveted for tea.”

ripe and unripe coffee cherries on branch

Coffee cherries ripen on the branch. Credit: Clint McKoy

China’s Impact on Western Markets

Where is Chinese coffee heading? And like many things in our global society, will Chinese consumption trends affect how people in the US and Europe drink coffee?

The simple answer is: yes (to some degree).

Peter says that if Chinese coffee consumption continues to grow, it could have an extensive influence on global pricing and availability. While there’s a long way to go yet, “if China reached a point where it was drinking half as much coffee per capita as the USA, we would see a massive global supply squeeze for Arabica.

“Prices for the top 1% of Arabica beans would rise and competition for the best lots from top producing countries would increase as well.”

At this point, Chinese coffee consumption and roasting would have a significant impact on how we consume our morning beverage.

Until then, let’s keep an eye on this exciting new entrant to the global coffee industry.

Enjoyed this? Check out Russia’s Specialty Coffee Scene in Moscow & St. Petersburg

Please note: This article has been sponsored by Royal Coffee, Inc.

Want to read more articles like this? Sign up for our newsletter!